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The business of Company is booming and its sales went up by 30 % this year. The same sales growth rate could continue next year
The business of Company is booming and its sales went up by 30 % this year. The same sales growth rate could continue next year if the company is able to expand its capacity in equal proportion to the sales. The firm currently has assets worth 4 million, 1 million in debt, a return on equity of 25 % and a dividend payout ratio of 50 %. a) What is Companys internal growth rate if it holds its dividend payout ratio constant? b) What is Companys sustainable growth rate? c) Calculate Companys required external funds next year if the company wishes to grow by 30 % and hold its dividend payout ratio constant.
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